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Contents
I. RESEARCH BACKGROUND................................................................................................... 2 II. DEFINITIONS ........................................................................................................................... 3 III. METHODOLOGY ................................................................................................................... 5 . ABSTRACT ............................................................................................................................... 7 V. TEXT OF REPORT ................................................................................................................... 8 1. CHINAS ENVIRONMENT OF ONLINE LUXURY SHOPPING MARKET .................... 8 1.1. DEVELOPMENT OF LUXURY SHOPPING IN CHINA VS. BEYOND CHINA ..................................... 8 1.2 CHINAS ENVIRONMENT OF ONLINE LUXURY SHOPPING MARKET ............................................ 8 1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury.............................................................................................................................................. 9 1.2.2 Economic Environment: Luxury Brands are Powering into China Market ...................... 9 2. INDUSTRY CHAIN OF CHINA ONLINE LUXURY SHOPPING .................................... 11 2.1 INDUSTRY CHAIN OF CHINA ONLINE LUXURY SHOPPING ......................................................... 11 2.2 SUPPLY CHAIN OF CHINA ONLINE LUXURY SHOPPING ............................................................. 13 3. MARKET SCALE OF CHINA ONLINE LUXURY SHOPPING MARKET .................... 15 4. DEVELOPMENT OF CHINA ONLINE LUXURY SHOPPING MARKET ..................... 17 4.1 TRENDS IN CHINA LUXURY ONLINE SHOPPING MARKET ......................................................... 17 LEGAL NOTICE .......................................................................................................................... 19
I. Research Background
With rapid development of China economy, China middle class with a large share is emerging as a principal part of luxury consumers and Chinas demand for luxury is increasing, which is a driving force of luxury market development in China. Since 2010, luxury B2C industry has become the focus of capital market. According to statistics from ChinaVenture, investment for luxury shopping websites is relatively small before 2010; while in 2010; online luxury shopping welcomes an explosive growth, including 12 financing cases with 108 million US dollars, the amount of which exceeds the total amount of past few years. The first half of 2011 has seen 12 financing cases with 283 million US dollars, the highest level in the history. Driven by huge market potentials, many domestic luxury e-Commerce enterprises enter into this industry, for instance, VIPshop.com, Xiu.com, 5lux.com, Vipstore.com, Shangpin.com, ihaveu.com. 360buy released its independent luxury shopping site 360Top.com in November, YOKA released the shopping site Ymall.com and Qihoo released the luxury navigation site lux.360.cn. In addition to professional luxury shopping websites, traditional shopping platform, fashion media and internet giants all enter into this industry, which will bring some changes and challenges to the market. Currently, there is relatively less research on luxury shopping enterprises and the whole market, and the industry has huge market potentials. Through this report, iResearch aims to analyze the status quo of the online luxury shopping market and provide support and guidance for our customers. First chapter mainly introduces luxury shopping and online luxury shopping market in China. Chapter two analyzes the industry chain, supply chain and categorization of luxury shopping websites. Chapter three deals with the overall market of online luxury shopping in China and its market potentials from three perspectives, namely, market scale, market share and traffic ranking of typical luxury shopping websites. In chapter four, we carry out analysis on online luxury shopping enterprises. The last chapter deals with the trend of China online luxury shopping market, provides our suggestions on the development, and discusses the potential opportunities to enter this market.
II. Definitions 1. Definition and classification of online shopping and composition of industry chain
Definition of online shopping
Online shopping refers to the process in which individual users (consumers) purchase products or services via internet from sellers. Throughout the whole process, as long as internet is involved in any of link (cash flow, logistics or information flow), it can be called online shopping. Classification of online shopping
Online shopping can be classified into different categories according to the subject and object in transaction, level of e-Commerce and types of upstream providers. Please refer to the chart below.
Different Types B2C, C2C online retailer, traditional manufacture/brand manufacture, channel seller, individual seller physical objects, virtual goods, services fully-electronic, not fully-electronic
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1) Luxury: Luxuries are defined as consumer goods that are not considered essential and associated with affluence, with features of uniqueness, scarcity and preciousness, also named unnecessities. Luxury goods are generally with a long history and cultural significance, exquisite craft and design and also a high price with expensive brand premium. Luxury is regarded as an emblem of consumers status, accomplishment and wealth, like the diamond ring of Cartier who once provided jewelries for Edward VII of the United Kingdom. For products which are produced and sold massively but still hold features of uniqueness, scarcity and preciousness in raw material, they are defined as pan-luxury only with part of luxury features such as loose diamonds.
2) Online Luxury Shopping Online Luxury Shopping refers to consumers behavior of buying luxuries from website operators through the Internet. As long as a consumer places an order online, the whole buying process will be regarded as online luxury shopping, no matter he or she finished the payment online or off-line.
3) Online Luxury Shopping User Online Luxury Shopping User refers to the internet user who purchased luxuries online at least once within the past six months. In this report, this term refers to internet users who purchased luxuries online from Jan 2010 to Sep 2011. 4) Luxury Shopping Website Luxury Shopping Website refers to the site which sells luxuries. Luxury shopping websites include all C2C and B2C websites. Among different B2C websites, independent B2C websites refer to shopping websites which sell luxuries only or have independent sales channels for luxuries(sales of luxuries accounts for over 30% of total sales), and are independently responsible for purchase, storage, and logistics. Independent B2C websites will be the focus of our research in this report.
Market scale of online luxury shopping refers to the total transaction size of online luxuries. Only the online transaction size of domestic luxury shopping websites is calculated, the transaction size of luxuries directly sold in China by foreign luxury shopping websites is excluded. Only B2C and C2C luxury online shopping models are included, 2B models are excluded. Only deals closed by access of the Internet are included. Face to face deals off-line are excluded in the trade volume of C2C online luxury shopping. Deals in other channel like in hypostatic stores or through telemarketing are excluded in B2C online luxury shopping. If a website sells both luxury goods and non-luxury goods, then non-luxury goods will not be included in its trading volume of luxury goods. For example, the trading volume of KELA does not contain that of jewels.
Categories covered in this research involve apparel, shoes, bags, watches, jewellery, beauty & fragrance, wine &liquor, accessories, stationary and home. Service, hotel, restaurant, automobile and villa are excluded. The brands involved in online luxury shopping are top luxury mainline brands (e.g. Hermes, Gucci, Louis Vuitton, Prada, MIUMIU) of international fame as well as their second-line brands (e.g. Victorias Secret, Swarovski). But new fashion brands are excluded.
III. Methodology
iResearch mainly conducts industry research through deep industrial interview and desktop
research: Understand the general situation of relevant industries and obtain sales and marketing statistics through interviewing experts, manufacturers and channels of this industry deeply Desktop research, obtain statistics of industrial scale by comparing public information and referring to user investigation statistics
Analyze through iAdTracker online ad supervision system, iUserTracker online behavior continuity research system and iResearch e-commerce comprehensive data supervision product Ecommerce Plus.
Ways of iResearch obtaining some public information: Statistics and information from the government Relevant economic statistics Public information about this industry Annual report and quarterly report of enterprises Public views of senior experts of this industry
The development of luxury shopping in China is subject to high tariffs and import duties. The reduction of tariffs is required by circumstances and the reduction will further promote the rapid growth of luxury shopping in China and the fast development of online luxury shopping market. Most of top luxury brands have already entered into Chinese market and planed development strategies in tier two and tier three cities, uplifting customer awareness and influencing their consuming habits. Due to the limitation of economic level, consuming capability, shopping places and local traffic conditions, most of cities do not have direct-sale store or agency. It also lays the foundation for the development of online luxury shopping market in recent years. Market Scale of China Online Luxury Shopping Market
Data from iResearch shows that the market scale of China online luxury shopping (including C2C and B2C) is 6.36 billion Yuan in 2010 and it is estimated to grow 68.8% to 10.73 billion Yuan in 2011. The proportion of online luxury shopping in overall online shopping remains at 1-2%. In 2010, the proportion is 1.38 while this number is estimated to reach 1.41% in 2011. The penetration rate of online luxury shopping in overall luxury shopping in China is 3.16% in 2010 and will come to 4.37 in 2011. It is estimated that in 2015, the penetration rate will arrive at 8.03%. Typical Online Luxury Shopping Enterprises in China
iResearch considers that the main edge of fashion shopping websites like VIPshop.com and Xiu.com lies in: (1) a wide range of products with relatively stable source of supply; (2) a large number of visits per day and monthly visits with a large group of targeted users; (3) sound delivery and logistics services with better user experience. However, those websites are not real luxury shopping websites and cannot provide good products and services for luxury shopping users. Compared with integrated shopping websites, vertical luxury shopping websites are more professional with better reputation among high-end fashion users. However, they lack stable source of supply in the industry and the user activation rate fluctuates greatly. Diversification will be the future trend of vertical luxury shopping sites. kela.cn and jufengshang.com are typical segmental luxury shopping websites in two subcategories: jewelry and watches of famous brands, but their speed of development is quite different. kela.cn has developed rapidly because the website brand is the product brand, so that it has greater pricing power. As for jufengshang.com, it specializes in luxury watches. As prices of its watches will be greatly influenced by tariffs and brand manufactures, it does not have obvious price advantage and the sales grow slowly. iResearch holds that, compared with integrated luxury shopping websites, segmental luxury shopping websites are more professional with better reputation, but the repeat purchase rate is relatively low. Advice on Development of China Online Luxury Shopping Market
Based on analysis of trend in online luxury shopping market, iResearch proposes the following advices: (1)Strengthen the cooperation with other sectors in the industry chain: integrate more community elements to create a fashion-luxury consumption circleand cooperate with integrated shopping websites and improve visits among luxury shopping users. (2) Improve website services: uplift consumer shopping experience; enhance network security; and elevate after-sales services.
tariffs and consumption tax, and lack of relevant laws and regulations to protect the rights of consumers and operators. iResearch holds that it is of great importance for online luxury shopping enterprises to get a comprehensive understanding of the market environment.
1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury On April 1st, 2006, China raised consumption tax rate for some goods. It will collect a 30% consumption tax on cosmetics, 10% on golf balls and golf clubs and 20% on watches of over 10,000 Yuan. The Ministry of Finance announced that from January 1st, 2007, consumption tax rate of golf balls and golf clubs and high-end watches was raised from 10% to 30%, and that of cosmetics was raised from 20% to 50%. China imposed high tariffs on luxuries such as jewelries, footwear and clothing, watches, cosmetics and alcohol on a 10%, 20%, 30% and even 50% basis. The consumption tax and import duties are relatively high in China. Products often come into the market three months later than US and Europe and a large number of products are not available in China. Under such circumstance, most of domestic consumers do not choose to buy luxuries in China. In addition, consumer spending on luxuries outside China is excluded in the import and export value released by government, increasing the net export value and putting upward pressure on RMB. It also has been excluded in the total retail sales of social consumer goods, affecting the effectiveness of consumption stimulation strategy. Therefore, with constant demand of domestic consumers on luxury shopping, how to enlarge domestic luxury consumption and promote the prosperity of domestic economy is an important issue. In the news conference held by Ministry of Commerce on June 15th, 2011, spokesman Yao Jian said that Relevant government departments have reached a consensus that China should further reduce import duties, as well as tariffs on some of high-end commodities when answering how to expand domestic sales of overseas luxuries. Ministry of Commerce holds that it is better to reduce tax rate and encourage consumption in China than impose high tax rate and let consumers purchase abroad. On the contrary, Ministry of Finance holds that selling in a high price is the marketing strategy of most of foreign luxury brands. Tax reduction cannot significantly lower the price. It seems that the so called consensus has not been reached by these two ministries. iResearch believes that in the long term, tariff reduction is imperative. It will also promote the rapid growth of domestic luxury consumption and online luxury shopping market. However, current development of this market is limited by high tariffs and import duties and the reduction is hard to be achieved in the short term, thus the luxury industry will still be constrained. 1.2.2 Economic Environment: Luxury Brands are Powering into China Market With rapid development of domestic economy, China middle class with a large share is emerging as a principal part of luxury consumers and Chinas demand for luxury is increasing. The rising of domestic economy uplifts the consumption level and consumers confidence. Overseas luxury manufactures see the huge market potentials in China and are powering into this market. As for the time when luxury brands entering the Chinese market, more brands come to China and gradually increase their investment. Since 1990, the following luxury brands and operators have already been introduced in China. In 1991, Ermenegildo Zegna entered the Chinese market; In 1993, Alfred Dunhill entered Shanghai; In 2000, Versace entered the Chinese market; In 2000, Vacheron Constantin came to China and opened its first store in Beijing In 2001, Tiffany opened its first store in China; In 2005, top luxury watch brand Patek Philippe entered Shanghai;
In 2005, Valentino opened its first store in Beijing; In 2006, Rolex opened its first store in Beijing In 2 009, top luxury brand FRETTE from Italy entered Chinese market and became the first indoor decoration luxury brand in China. In 2010, YOOX, a famous online luxury shopping operator from Italy entered the Chinese market.
As for the shop distribution, at first most of luxury brands choose to open stores in five-star hotels in order to highlight the distinguished and luxurious quality. Later, they began to open stores in some shopping malls throughout the country. Louis Vuitton opened direct sale stores in nearly 30 cities in mainland China, including Harbin, Changchun, Fushun, Dalian, Hohhot, Beijing, Tianjin, Qingdao, Taiyuan, Zhengzhou, Xi'an, Chengdu, Chongqing, Wuhan, Kunming, Nanning, Changsha, Nanjing, Wuxi, Suzhou, Shanghai, Hangzhou, Ningbo, Wenzhou, Fuzhou, Guangzhou, Shenzhen, Sanya, etc. Armani opened stores in over 20 cities, including Beijing, Shanghai, Guangzhou, Shenzhen, Hangzhou, Chengdu, Qingdao, Xi'an, Chongqing, Tianjin, Nanjing, Dalian, Wuhan, Wenzhou, Suzhou, Wuxi, Kunming, Shenyang, Harbin, Changchun, Urumqi, etc. Burberryopened direct-sale stores in over 30 cities. Hermsstores are distributed in 13 cities in China, namely, Beijing, Shanghai, Guangzhou, Shenzhen, Harbin, Dalian, Qingdao, Wuxi, Nanjing, Hangzhou, Suzhou, Chengdu and Kunming. Ermenegildo Zegna has ente Chinese market for twenty years with more than 60 stores red throughout the country. Currently, most of top luxury brands have already entered into Chinese market and planed development strategy in tier two and tier three cities, uplifting customer awareness and influence their consuming habits. However, due to the limitation of economic level, consuming capability, shopping places and local traffic conditions, most of cities do not have direct-sale store or agency. It also provides opportunities for the development of online luxury shopping market in recent years.
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iResearch makes corresponding analysis of the supply chain of luxury shopping websites according to the purchasing process and the flowing direction of products as follows: On the one hand, the distribution channels of brands can be classified into two different two types: (1) Type I: luxury brands with protective policy, like Louis Vuitton, Hermes and Chanel. These brands value the brand images and the control of price, so the only channel is regular chain store in China or overseas. As no proxy or authorization of these brands is allowed, the only purchasing channel of luxury shopping websites is to buy products from chain store. (2) Types II: luxury brands with authorization policy. These brands limited the extent of authority to sales agents or distributors. China luxury shopping websites secure the stable supply by obtain the authorization from proxy or distributors. On the other hand, the supply of China self-run luxury shopping websites includes several channels: (1) To obtain authorization from the brands, the proxy or the distributors and to purchase products.(2) To purchase ( even buy out) out-of-season luxury products by buyers in discount stores or outlets.(3) Direct purchase in release conference or holiday promotion conference like Christmas sale. (4) To buy products of new season in brand store but with little discount. The first two channels are the main purchasing channel of China luxury shopping websites supplying out-of-season products; the other two feed the need of new arrivals from consumers. But the profit comes from the regional price differences in all purchasing channels. Comparison of the first two main channels: (1) the authorization and buying model secures the stable supply, but disadvantage lies in the long time in delivering products since the ordering in China and purchasing abroad model; (2) Purchasing by buyers is more quick and flexible, but loose and unstable. Also, the number of the same products from each channel is less than 10, even outlets offers only around 20, therefore, the small number of products and the less coincidence require panic buying of China online luxury shoppers.
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Figure 3-1 Market Scale of China Online Luxury Shopping From 2010 to 2015
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First, consumers recognition toward luxury brands will be gradually increased, they will be no longer limited to top luxury brands such as Armani or Gucci; Second, consumers buying psychology is to be mature, they will no longer buy luxuries only to show-off, but gradually transfer to focus on the overall product experience and pursuit of life with high quality ; Third, personalized demand will increase as consumers are tend to use different brands of luxury goods in different high-end occasions.
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Legal Notice
The report is produced by iResearch Co., Ltd. All sentences, charts, tables and etc. in this report are under the protection of relative law and constitution on property rights in Peoples Republic of China. The report may be used for informational purposes only. Without iResearchs written authorization, any organization or individual is not allowed to use the information in this report for any business purpose. Some sentences and data in this report are collected from public publications and their copyrights are owned by the original publishers. Without written authorizations from the original publisher and iResearch, no part of this report may be used for any business purpose. Statistics related to operators revenue and market prediction are mainly obtained through interviews, marketing survey, secondary sources and etc., some of which have not been confirmed by the related operators. In addition, statistics resulting from sample research in this report are influenced by sample structure. Due to the limitation of research method, limited sample and research sample, part of the result may not precisely reflect the situation. Customers should use this report as only a reference material in making business decisions. iResearch does not guarantee the accuracy of all data in this report. Company Description: iResearch Consulting Group: http://www.iresearch.com.cn Products: iResearch client solutions: http://www.iresearch.com.cn/solution iResearch continuous data research products: http://www.iresearch.com.cn/product iResearch thematic research and consulting service: http://www.iresearch.com.cn/consulting iResearch views & reports: http://www.iresearch.com.cn/report iResearch Institute training business: http://www.iresearch.com.cn/institute iResearch media conference service: http://www.iresearch.com.cn/meeting Websites for Information: iResearch: http://www.iresearch.cn iResearchAds: http://www.iresearchad.com iWebChoice: http://www.iwebchoice.com To purchase/inquire about reports, please contact: Address: 5/F, Office Part Tower AB, 10 West Jintong Road, Chaoyang District, Beijing, 10002 Tel: 010-51283899-Business Department iResearch Consulting (Shanghai) Co., Ltd Address: Room 701, Zhongjin Building Tower B, 333, North Caoxi Road, Xuhui District, Shanghai, 200030 Tel: 021-51082699- Business Department iResearch Consulting (Guangzhou) Co., Ltd Address: Room 707, Yaozhong Plaza Tower B, 3-15, West Linhe Road, Tianhe District, Guangzhou, 510620 Tel: 020 -38010229 Chief Consultant: Henry Yang, President Email: henry@iresearch.com.cn
APPENDIX I
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I. Research Background II. Definitions III. Methodology IV. Abstract V. Text of Report 1. Chinas Environment of Online Luxury Shopping Market 1.1. Development of Luxury Shopping in China vs. Beyond China 1.2. Chinas Environment of Online Luxury Shopping Market 1.2.1. Political Environment: Adjustment of Tariff Probably Push up the Consumption of Luxury 1.2.2. Economic Environment: Luxury Brands are Powering into China Market 1.2.3. Social Environment: Online Luxury Shopping Market Shows the Trend of high-end and segmentation 1.2.4. Technology Environment: Reform in China Internet Will Drive Online Shopping Operators to Build Infrastructure 2. Industry Chain of China Online Luxury Shopping 2.1. Industry Chain of China Online Luxury Shopping 2.2. Supply Chain of China Online Luxury Shopping 2.3. Description of Online Luxury Shopping Websites 3. Market Scale of China Online Luxury Shopping Market 3.1. Market Scale of China Online Luxury Shopping Market 3.2. Share of China Online Luxury Shopping Market 3.3. China Online Luxury Shopping Website Rankings 4. Analysis of Online Luxury Shopping Enterprises 4.1. China Online Luxury Shopping Enterprises 4.2. Comparison of Typical Fashion Online Shopping Enterprises 4.2.1. Analysis on Typical Enterprises VIPshop.com 4.2.2. Analysis on Typical Enterprises Xiu.com 4.3. Analysis of Vertical Online Luxury Shopping Enterprises 4.3.1. Analysis on Typical Enterprises: 5lux.com 4.3.2. Analysis on Typical Enterprises: Vipstore.com 4.3.3. Analysis on Typical Enterprises: Shangpin.com 4.4. Analysis on Typical Vertical Online Luxury Shopping Websites 4.4.1. Analysis on Typical Enterprises: Kela.cn 4.4.2. Analysis on Typical Enterprises: jufengshang.com 5. Development of China Online Luxury Shopping Market 5.1. Trends in China Luxury Online Shopping Market 5.2. iResearchs Advice on Development of China Online Luxury Shopping Market 5.3. Potential Chance to Enter China Online Luxury Shopping Market VI. Legal Notice
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Appendix II:
Figure II-1 Industry Chain of China Online Shopping Figure II-2 Typical Luxury Brands in China Figure 1-1 2008-2014 Market Scale of China Online Shopping Users Figure 1-2 2008-2014 Number of China Online Shopping Users Figure 2-1 Industry Chain of China Online Luxury Shopping Figure 2-2 Supply Chain of China Online Luxury Shopping Figure 3-1 Market Scale of China Online Luxury Shopping From 2010 to 2015 Figure 3-2 Market Share of China Luxury Online Shopping Operators in 2011 Figure 3-3 Market Scale of China Major Vertical Luxury Online Shopping Operators in 2011 Figure 3-4 iUserTracker-Number of Unique Visitors Per Day of China Typical Luxury Shopping Websites from Jan. to Aug. in 2011 Figure 3-5 iUserTracker- Number of Monthly visits of China Typical Luxury Shopping Websites from Jan. to Aug. in 2011 Figure 4-1 Typical Independent Luxury Shopping Websites in China Table II-1 Classification of Online Shopping Table II-2 Classification of Luxury Shopping Websites Table 2-1 Classification of China Luxury Websites & Companies Table 4-1 Information about Main Independent Luxury Shopping Websites Table 4-2 Comparison between VIPshop.com and Xiu.com Table 4-3 Comparison between 5lux.com, Vipstore.com, and Shangpin.com Table 4-4 Comparison between Kela.com and Jufengshang.com
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